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About C & I Tax

C & I is a group of tax consultants who assist with managing and supplying guidance regarding the California Enterprise Zone Tax Credits. This is a niche area of accounting that saves clients tremendous amounts of taxes. C & I deals directly with clients and subcontract with many accountants to do the Enterprise Zone credits for their clients.

Every year, the state of California gives out hundreds of millions of dollars in enterprise zone tax credits. C & I, the tax credit experts, can help you get these credits.

Today the HCD issued this press release regarding implementation of new policies, including a moratorium on new zones. The stated aim of the new policy memorandum is to make the EZ more accountable, efficient and consistent with the Governor’s May budget revise, i.e. a push by the unions to undercut the EZ program from within. The legal analysis is beginning on the HCD’s claim that the law allows for “up to” 42 zones which if read in the correct light, means phasing out the program. Read the memo here.

A bill intended to close a loophole in existing law that lets companies relocate to another city within the state to gain lucrative tax credits failed to pass out of a legislative committee yesterday.

Assembly Bill 1278, authored by Assemblyman Jerry Hill, D-San Mateo, was inspired by a company, VWR International, that is ditching Brisbane to relocate to an enterprise zone in the city of Visalia.

But Hill failed to get the four votes needed to move the bill past the committee stage.

“The bill was not supported by the chair. I thought I could do it now and was looking for one Republican to support it,” Hill said.

The state Assembly Committee on Jobs, Economic Development, and the Economy is chaired by Manuel Perez, D-Coachella. Perez’s Assembly District includes Imperial County, which officially opposed Hill’s legislation.

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Perez’s 80th Assembly District covers all of Imperial County and parts of Riverside County and the area’s high jobless figures prompted him to vote against Hill’s bill.

“Coming from a community with unemployment over 20 percent and that has historically suffered from a lack of private investment and jobs, I’m always concerned about the impacts of business closures on families and communities. My vote today does not reflect my lack of concern about this issue but rather the importance of pushing for a broader enterprise zone reform agenda,” Perez wrote to the Daily Journal in an email.

“I initiated the reform conversation more than a year ago and the negotiation includes a number of issues such as business relocation and the tighter targeting of business incentives. Some of the reform proposals are in my bills, AB 231 and AB 1411. I hope my actions today will induce labor and business to come back to the table,” he continued in the email.

The San Bernardino Valley Enterprise Zone (SBVEZ) announced the businesses utilizing the zone have filed more than 2,000 hiring tax credit vouchers since Jan. 2011. The number of vouchers filed this year will soon exceed the total number of vouchers filed in 2010, in just half the time.

Last year, approximately 2,300 vouchers were filed by 182 businesses. This year more than 145 businesses have already taken advantage of the incentive. The zone has seen a significant jump in activity from businesses, suggesting that number of vouchers filed in 2011 will double the number filed last year.

“Each year we seem to double the number of vouchers filed from the previous year, and having already reached 2,000 vouchers is a good sign we will do it again this year,” said Wendy Clements, SBVEZ zone manager. “The continued growth of the program locally shows that our efforts to educate employers about the zone are paying off.”

The hiring tax credit is the most commonly used program incentive, which grants employers a tax deduction for providing a job to a local disadvantaged worker who faces barriers to employment. Common barriers include long-periods of unemployment, receipt of public assistance, lack of skills and education, and having a disability or a criminal history.

The 2,000 vouchers filed so far this year are estimated to produce $75 million in tax savings for these businesses during the five-year period they can claim the credit for a single employee. Reports also show that these cost savings have contributed to the creation of 14 new jobs and the retention of 1,998 existing jobs in the zone.

Designated in 2006, the SBVEZ includes the city of Colton, city of San Bernardino and unincorporated portions of San Bernardino County.

The key words are “majority vote” which mean that Brown was unable to garner the two thirds vote necessary to eliminate or “reform” the EZ program out of existence. The following is from the Sacramento Bee:

Gov. Jerry Brown and Democratic legislative leaders announced today that they have reached an agreement on a new majority-vote budget plan.

“We’ve had some tough discussions, but I can tell you that the Democrats in both the Senate and the Assembly have now joined with the administration and myself and we have a very good plan going forward with the budget,” Brown said at a press conference in his office this afternoon.

The proposal, outlined in this post, assumes that the state will bring in an additional $4 billion in revenues in the upcoming fiscal year, based in part on higher-than-expected revenue figures in recent months. If those revenues fail to materialize, steeper cuts to programs including K-12 schools, higher education, public safety programs and In-Home Supportive Services would occur later in the year.

“We have severe trigger cuts that will be triggered and go into effect (without the projected revenues),” Brown said. “And those are real.”

“We’ve added 92,300 jobs in Texas so far in 2011,” said TWC Commissioner Ronny Congleton. “That is a trend that we hope to continue until all Texans have good jobs earning good wages.”

Texas had fewer than a million unemployed workers in May while California had more than 2 million. Texas’ jobless rate was under the national average, while California’s was the second highest in the nation. Texas has accounted for nearly half of the nation’s job creation since 2009.

“Growth in the Texas economy is gaining steam,” says a recent analysis by the Federal Reserve Bank of Dallas. Clearly, Texas and other states are emerging from recession while California’s recovery, if it exists, is decidedly weak, as several new economic reports note.

It means that millions of jobless workers and their families struggle to keep roofs over their heads and food on their tables.

It means that the state is paying out $600 million a month in unemployment insurance and its jobless benefit fund is already $11 billion in the red.

It means that state and local officials struggle with budget deficits and are slashing education, social and health services, police and fire protection.

California politicians are very defensive – even dismissive – about comparisons with Texas, but the economic differentials between the two states are too stark to ignore.

However they deal with the deficit-ridden state budget in the short term, Gov. Jerry Brown and legislators should move economic competitiveness to the top of their agenda.

Enterprise Zone supporters have long made the claim that the EZ program lowers the amount of unemployment claims the state has to pay by far more than the Program pays out. California legislators can pay heed, or they can continue to ignore those states that do….and the consequences will be again be obvious.

Santa Clarita Valley officials said Wednesday that they’re skeptical of Gov. Jerry Brown’s latest budget proposals that plan to scale back a program that gives tax breaks to local businesses.

Brown proposed in January to do away with the Enterprise Zone program entirely to help balance California’s budget. But Brown eased the hard stance against the program thanks to an unexpected windfall of $6.3 billion in revenue for the state.

Throwing the Enterprise Zone program a lifeline is one of several maneuvers intended to sway four Republicans lawmakers. Brown is seeking a two-thirds majority vote in favor of placing a five-year extension on vehicle licence fees and sales taxes. The tax extensions would raise an estimated $10 billion to help close California’s ongoing budget deficit.

Assemblyman Cameron Smyth, R-Santa Clarita, said he would vote against the tax extensions.

While Brown has been proactive in reducing state spending, Republicans want Brown to reform the state’s pension system and place a cap on state spending, Smyth said. Enterprise zones, meanwhile, help attract firms to California, he said.

“The governor certainly wants to find Republican votes, but he’s going to have to do more than what’s come out of the May revisions,” Smyth said. “Enterprise zones should be left alone.”

The Governor’s May budget revision significantly reduces the credit available to businesses. Essentially, the credit will be reduced to $5,000 per employee. Below is the section that discusses Enterprise Zones.

Reform Enterprise Zones — The purpose of enterprise zones is to encourage economic activity for particular geographic regions. However, there are two significant failings in the way the current tax incentives are structured. First, the Enterprise Zone hiring credit encourages the hiring of employees. It does not encourage the creation of new jobs. A business that lays off five employees and hires one at $50,000 per year, gets the same credit as a business that expands its number of employees and hires an employee at $50,000 per year. In fact, if the employee in the first case meets one of the vouchering criteria — they live in the area — and the employee in the second case meets none of the vouchering criteria, the firm in the first case will receive a credit while the employer in the second case will not. Enterprise Zone programs should reward employers for creating new jobs. Second, employers can benefit from Enterprise Zone credits even when it is demonstrable that the existence of the credit had nothing to do with the fact that they have hired a new employee. This is evident by the existence of a phenomenon referred to as “retro-vouchering”. “Retro-vouchering” typically occurs when a private tax consultant makes contact with a business located in the zone and offers that business their services, on a contingency-fee basis, to determine if any of the employees hired by this firm within the last several years qualifies to be vouchered for the hiring credit. When this happens, clearly the hiring firm did not act based on the Enterprise Zone hiring credit as they were not even aware of the credit when they did the hiring.

Instead of repealing state tax benefits for Enterprise Zones, the May Revision proposes to reform Enterprise Zone hiring credits so that credits are only available to firms which actually increase their level of employment. Taxpayers would be eligible for a $5,000 credit for each incremental full-time equivalent employee that they hire. These credits would only be allowed if claimed on the taxpayer’s original return. Additionally, the May Revision proposal would not allow any new vouchers to be granted for tax years prior to 2011 when the application for that voucher was made more than 30 days after the date that the employee first begins employment. Additionally, to ensure that credits are creating incentives for relatively profitable, tax-paying businesses, the Enterprise Zone credits will be limited to a five-year carry-forward period.